How to Trade the iPad Air Announcement

by Michael Shulman | October 22, 2013 3:41 pm

How to Trade the iPad Air Announcement

[1]Apple (AAPL[2]) announced a new family of iPads[3] today — the iPad Air[4]. Coincidentally, I am typing on a Mac Air, and my iPad is packed for a trip to New York tomorrow — so yes, I know what I am talking about from a user and an investment perspective. The stock was up, then as the iPad Air announcement wrapped up, it was down. Traders are leaving, while investors are waiting and should come in soon.

Why?

The new iPad Air is priced like the older iPads — at a premium — and are clearly the best in class and deserving of the premium price. This is the strategy the company took with the new iPhones unveiled last month. The new iPad Air is 28% lighter, feels smaller due to a reduced bezel and has the fabulous retina display and resolution. It is easily the best product on the market. The old iPad was the best product on the market and this move shows that Apple, despite what analysts using Blackberry (BBRY[5]) phones and Microsoft (MSFT[6]) Windows personal computers might say, is still by far the best tech outfit anywhere on earth.

It’s also the most valuable brand according to Interbrand[7].

And the most profitable purveyor of mobile and stationary computing and communications devices.

And the largest seller of music in the world.

And the largest electronics retailer.

And so on.

These fundamentals matter for if you are a trader or an investor. The underlying fundamentals are critical since we are in a stock-pickers’ market and you have to develop positions accordingly.

How to Trade the iPad Air

If you are a trader, and want to stay loose, sell some puts. The announcement has pushed up the value of the premiums you can sell.

Sell this week’s $515 put and you have a 0.6% return in three days, a 31% annualized return. Own the shares and sell the $525 calls, you get near the same return and if you buy the shares, sell the calls and get called out your return is 0.7% or 36% on an annualized basis.

Bully for Apple — they are sticking with a high-margin, high-profit, super high-quality strategy. Five years from now someone will have knocked off Samsung as the other hardware player and our iPhone 8s and iPad NanoAirs will sill be the best products on the market.

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